German pharma giant Bayer AG (BAYN.DE) on Monday announced its official offer to acquire Monsanto Co. (MON) for $62 billlion. The agricultural chemical giant has a market capitalization of $44 billion. Monsanto share prices jumped close to 8% in early trading on the heels of the announcement.
This would be the second-biggest acquisition made by a German company, after the 1998 Daimler merger with Chrysler. (Related: What is the Difference between a Merger and a Takeover?)
Bayer's official announcement described the proposed acquisition as a "compelling opportunity to create a global agriculture leader, while reinforcing Bayer as a Life Science company with a deepened position in a long-term growth industry." Per the announcement, the Bayer bid represents the following:
- A premium of 37% over the closing share price on May 9, 2016
- A premium of 36% over the three-month volume weighted average share price
- A premium of 33% over the six-month volume weighted average share price
- A last twelve months EBITDA multiple of 15.8x as of February 29, 2016
Such a union would allow both companies to expand their geographical bases. Bayer would be positioned to expand its life sciences influence, and Monsanto would seemingly benefit in that it would reduce its exposure to heavy losses it suffered at the hands of tanking grain prices.